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Assetz reveals property funds boom

Amanda Jarvis

May 15, 2006

Assetz said property funds offer greater flexibility, diversity and considerably less involvement than syndicates or direct property investment.

As pressures on our time increase, investors are adapting their approach to property investment, seeking out property funds that will require no further input after the initial cash outlay, but that still deliver tactical investment strategies.

The entry level for property funds is normally lower than the amount of capital required to buy into a syndicate, or to pay for a deposit on a buy-to-let flat. This enables investors to enter into property investment with a smaller amount of cash, allowing them to invest in more than one fund with different objectives, thereby developing a truly diverse portfolio. This helps protect against downturns in one sector of the market.

Funds also benefit from being steered by a professional fund manager, with years of expertise and experience in property, and who is regulated by the FSA. Whether the fund is regulated or unregulated itself, it must still be run by a regulated fund manager, although regulated funds are the only ones offering investor protection.

Stuart Law, managing director of Assetz, commented: “Investors are attracted to the hassle-free aspect of investing in property funds, which appeals to those who want to make money from property for their retirement, but who do not have the time or inclination to be a traditional landlord. With 7 per cent capital growth in the UK looking likely by the end of 2006, opportunities still abound for investors looking to profit from property, and the chance to hand all responsibility for their investments over to a professional and regulated fund manager is extremely appealing.”

Unlike regulated funds, most unregulated funds enjoy good lending criteria, with gearing up to 80 – 85 per cent, emulating that of a traditional buy-to-let investor. The potential returns on cash invested are therefore vast, but the diversity of the property within the fund reduces the risks normally associated with highly geared investments.

Investors who may want to withdraw capital from their investments early are attracted to regulated 'open' funds, as it is relatively easy to release money due to its liquidity, compared to a single property purchased individually or through a syndicate. In order to release capital from such an investment, the property or syndicate share would have to be sold. .

Stuart Law continued: “It is our opinion, and the opinion of many pension managers that most Sipp investors have no intention of getting their hands dirty by investing directly in property in their pension, but are instead drawn to managed funds.

“Syndicates do have their own selling points and are always attractive to investors looking for a specific strategy on a specific property and a more hands-on role. However they are better suited to the professional investor who is perhaps looking to mobilise extremely quickly in order to make the most of a specific short-term opportunity.”


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